Arnold's Hofbrau, Inc. v. George Hyman Const. Co., Inc., 71-1827.

• Citation: 480 F.2d 1145
• Decision Date: 07 June 1973
• Docket Number: No. 71-1827.,71-1827.
• Parties: ARNOLD'S HOFBRAU, INC. v. GEORGE HYMAN CONSTRUCTION CO., INC., Appellant, and Oliver T. Carr, Jr., et al.
• Court: United States Courts of Appeals. United States Court of Appeals (District of Columbia)

480 F.2d 1145 (1973)

ARNOLD'S HOFBRAU, INC. v. GEORGE HYMAN CONSTRUCTION CO., INC., Appellant, and Oliver T. Carr, Jr., et al.

No. 71-1827.

United States Court of Appeals, District of Columbia Circuit.

Argued December 12, 1972.

Decided June 7, 1973.

Stanley J. Marcuss, Washington, D. C., with whom Vincent H. Cohen, Washington, D. C., was on the brief, for appellant.

James A. Welch, Washington, D. C., for appellees Beuchert and Carr.

Leonard C. Collins, Washington, D. C., with whom James F. O'Donnell, Washington, D. C., was on the brief for appellee, Arnold's Hofbrau, Inc.

Before WINTER,^* Circuit Judge for the Fourth Circuit, and MacKINNON and ROBB, Circuit Judges.

WINTER, Circuit Judge:

Plaintiff, which conducted a restaurant on leased premises at 1724 Pennsylvania Avenue, N.W., Washington, D. C. (hereafter the "Hofbrau building"), sued George Hyman Construction Company, Inc. (Hyman) and Beuchert and Carr. It sought recovery against Hyman on the theory that Hyman, who was engaged in constructing an adjacent building (hereafter the "Mills building"), negligently damaged plaintiff's premises to the extent that plaintiff was forced to discontinue the operation of the restaurant. Recovery against Beuchert and Carr was sought on the theory that they, too, were negligent in undertaking repairs to plaintiff's premises and in failing to fulfill their promises to plaintiff to repair the premises. The record is not clear as to Beuchert's and Carr's precise interest in the Hofbrau building and the Mills building, but neither disclaims liability on the technicalities of ownership. In June 1968, Beuchert and Carr became owners of the Hofbrau building; prior to then Carr was a principal of a management company which managed the Hofbrau building. Beuchert and Carr were either trustees for the owners of the Mills building with a beneficial interest of their own, or copartners in the partnership which owned it. Beuchert and Carr cross-claimed against Hyman alleging that it had agreed to indemnify them for damages of the type asserted by plaintiff.

In a jury trial, plaintiff obtained a verdict for $90,000 against all three defendants. The jury was instructed that Beuchert and Carr, as owners of the Mills building, were absolutely liable for damages caused by its construction, and only the issue of proximate cause was submitted to the jury. However, the jury, on its own motion, and with the court's permission, also found Beuchert and Carr liable on other grounds of negligence, the consequence of which would be to reduce any judgment to which they might be entitled on their cross-claim by one-half. In effect granting judgment n. o. v. on the jury's verdict with respect to the negligence of Beuchert and Carr, the district court set aside the jury's finding and gave Beuchert and Carr judgment on their cross-claim for full reimbursement.

In this appeal, Hyman contends that (a) the district court erred in granting the motion for judgment n. o. v. of Beuchert and Carr and in sustaining their cross-claim for indemnity against Hyman, (b) the district court improperly instructed the jury with regard to the proper measure of damages that plaintiff should recover if liability of any defendant was found, and (c) the district court should have granted a mistrial because of persistent and repeated references throughout the trial by counsel for Beuchert and Carr to the fact that Hyman had liability insurance.

We agree that Beuchert and Carr were improperly exonerated and that the jury was improperly instructed as to how to measure damages. We do not agree that the references to Hyman's insurance coverage were so prejudicial as to warrant a new trial as to liability. We, therefore, reverse the judgment of Beuchert and Carr on the cross-claim and direct that it be re-entered for one-half of the damages to be subsequently determined, affirm the judgment of liability against Hyman, and award a new trial on damages as to all defendants.

I.

Since Hyman makes no substantial claim that it was not negligent, aside from the assertion of prejudice in the references to its liability insurance throughout the trial, we need not detail all of the evidence adduced against it at trial. We will confine ourselves principally to the facts bearing on the liability of Beuchert and Carr.

Plaintiff operated a German specialty restaurant at the Hofbrau building. The precise term of the lease is not disclosed; but in 1961 and again in June 1967, plaintiff was advised that its lease would be terminated in June 1969, and that it would be required to vacate the premises on or before June 30, 1969.

In 1965, Hyman contracted to erect the Mills building on the adjacent premises. Construction began in February 1965, and about eight months later, in October 1965, one of the plaintiff's principals noticed that the floor in the area of the kitchen and the coffee urn was sinking. Notice was given to the management agent for the building, who concededly acted as agent for Beuchert and Carr. Individually and through their agent, Beuchert and Carr assured plaintiff that the condition would be corrected and did, in April 1966, attempt to have the condition corrected by having jacks installed in the basement under the floor. That repair work proved ineffective, however, and the floor continued to sink. In June 1967, Beuchert and Carr's agent employed structural engineers to determine what was needed to be done to repair plaintiff's premises. That engineer advised that the jacks which had been installed were improperly located and were, therefore, ineffective to stem the increasing subsidence. The engineer recommended other corrective action, but the recommendations were never carried out.

Throughout this period, plaintiff believed that Beuchert and Carr would have the floor repaired, but the floor nevertheless continued to sink. In November 1967, the government of the District of Columbia ordered that the restaurant be repaired or closed. Beuchert and Carr re-engaged the structural engineer who repeated his earlier recommendations. When a contractor estimated that the cost of repairs would be approximately $10,000, Beuchert and Carr concluded not to have the work done, and finally in February 1968, informed plaintiff that the repairs would not be made. Plaintiff's restaurant operation at this location ceased on November 21, 1967; plaintiff made no attempt to relocate its business; but plaintiff continued to pay rent until March 1968, and incurred other charges.

II.

The district court instructed the jury, in effect, inter alia, that if it found that a defendant promised the plaintiff that he would make all repairs necessary to keep the premises in fit condition for the plaintiff to operate its restaurant, that the promises were made when defendant knew that plaintiff would rely on them, and that plaintiff relied on the promises to its detriment, it could conclude that that defendant was liable. After giving this instruction, the district court furnished the jury with a form of verdict which permitted it to find liability on the part of Beuchert and Carr only in their capacity as owners of the Mills building for violation of the D.C. Building Code. After the jury began its deliberations, it inquired whether it could find liability on the part of Beuchert and Carr on a general theory of negligence, and when it was advised that it could, it found against them, as well as Hyman. In fact, the jury's verdict was returned only against Carr, but it is not contested in this appeal that the return must be interpreted to include Beuchert also. The district court set this aspect of the verdict aside because it concluded that (a) while the evidence showed that Beuchert and Carr caused jacks to be installed under the kitchen floor and that they were improperly located, there was no evidence that the jacks caused any damage to the Hofbrau building, and (b) Beuchert and Carr could not be liable for failure to repair the Hofbrau building because Hyman's construction contract imposed that duty on him.

We disagree with the district court that there was no basis on which the jury could find liability on the part of Beuchert and Carr on general grounds of negligence. Two rules of law point to the opposite result. The first is the familiar statement that one who undertakes to act has a duty to act carefully and if he fails to do so, he may be held liable in negligence. Restatement of Torts 2d, Section 323 (1964). See President and Directors of Georgetown College v. Hughes, 76 U.S.App.D.C. 123, 126, 130 F.2d 810, 813 (1942); Adkins & Ainley, Inc. v. Busada, 270 A.2d 135, 137 (D.C.Ct.App.1970). The second is the principle of promissory estoppel, i. e., that one who promises another to act but fails without excuse to do so is liable to the party who has relied upon such promises to his detriment. Restatement, Contracts § 90 (1932). See Seavey, Reliance Upon Gratuitous Promises or Other Conduct, 64 Harv.L.Rev. 913, 926 (1951): "Estoppel is a tort doctrine. The rationale of Section 90 is that justice requires the defendant to pay for harm caused by foreseeable reliance upon the performance of his promise. . . ."

The evidence before the jury was that the agent of Beuchert and Carr repeatedly promised plaintiff that he would have the sinking floor taken...